Peak Oil

We were very interested to read last week that key figures on oil production produced by the International Energy Agency (IEA) were distorted following US pressure. A whistle blower at the Agency noted that it was “imperative not to anger the Americans. The fact was that there was not as much oil in the world as had been admitted. We have already entered the peak oil zone”

When the IEA was being run by the ridiculous Claude Mandil, he was merrily predicting that oil supply would rise to 120m. barrels a day by 2030. Since his departure the IEA has been forced to reduce its prediction to 116m and then 105m. last year.

The whistle blower went on to say “many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible. There are fears that panic could spread on the financial markets if the figures were brought down further. The Americans fear the end of oil supremacy because it would threaten their power over access to oil resources”.

Those who have been following my blogs over the past year cannot help but notice our constant themes of:

1. We are at or near the peak of oil;

2. The world is on a once off transition to sustainability;

3. No more fossil fired plant will be built after 2030.

What is puzzling about the latest revelations concerning the IEA is the alleged role the US are playing. Why would they seek to distort the truth? Everybody knows that the only way to deal with issues of great importance is to first of all admit that they exist. One has some chance of dealing with them if we acknowledge them and come up with alternative plans.

For those of us who have extensive business interests in the US and we see the underlying rationality of the majority of US foreign and domestic policy, it is both puzzling and interesting to try and understand why one branch of the power structure there seems to be leaning on the IEA ”and forcing it to come up with false conclusions”. Of course like all economies the US is not a homogonous entity.

I am sure that, like everywhere else, various interests contend for supremacy in any ongoing policy debate. The logic given by the whistle blower in the IEA that the US is doing this to prevent panic in the financial markets does not hold water under almost any circumstances. If what the IEA proclaim to be true is correct, as every shred of evidence in the world points towards, how much worse will the panic be when the truth is eventually accepted and we stare down the barrel of a gun at prices of US$200 – US$300 per barrel of oil and all other energies follow in price.

One of the great regrets of the 1990’s must surely have been that the world behaved as if there was infinite oil and that the price remained at a steady US$12 – US$18 a barrel throughout the period.

The price signal methodology of anticipating scarcity went unused in the case of oil.

Think of how far down the road we would be had we started to price energy properly. The development of renewables would be ten years on. The US and Europe would by now be well on the road to energy self sufficiency. Pollution, and global warming would be reduced and perhaps a 100m tonnes a day less CO₂ emissions would now be the case. Maybe even the Maldives could be saved.

It is an unfortunate fact that nothing can now save the Maldives.

It is difficult to remain sanguine in the light of this reported interference in the normal accurate reportage of the IEA.

Consider the following facts:

Every worst case scenario for the increase in temperature has been systematically exceeded over the past few years. Not only has the world reached a tipping point in terms of peak oil, it has also reached a tipping point in terms of temperature increase. The evidence accumulates that with the destruction of species, the melting of the glaciers everywhere including the Antarctic that global warming is proceeding at an explosive pace. The breaking up of the Larsen B Ice Shelf has led to an accelerated thinning of the great Antarctic glaciers. Into this global scenario should be painted the picture of China adding a new Germany to world energy demand every year. It is no exaggeration to say that we face a catastrophe that has never happened before, that nobody with the exception of the EU has really begun to plan for. We will return to this theme very shortly but let me conclude this blog by asking this question.

What of the future of democracy, rule by the people for the people and of the people. This has usually lead to more enlightened government, but how can we have more enlightened government in a situation of hugely rampant, indeed out of control, energy prices?

Two things flow from this:

1. The world turns to coal for energy which further accelerates the destruction of the environment.
2. Energy prices continue to escalate, there is a vast transfer of wealth to the Gulf States, they in turn seek to invest (where most of the people live) in the developed world. More money chasing the same number of goods leads to inflation, inflation leads to corrective government action, the cycles of booms and slumps accelerate, unemployment is an inevitable consequence and so we go back to our original question how do we practice democracy in such a scenario?

Let us revert to that question tomorrow.